Abstract
Foreignness has long been a central construct in international business research, with research streams examining its conceptualizations, manifestations, and consequences. Researchers started by taking foreignness to be a liability, then later considered the possibility of its being an asset. A still more recent view is that foreignness is an organizational identity that a firm can purposefully manage. Broadly conceived, foreignness is an umbrella construct that directly or tangentially covers research on country of origin, institutional distance, firm-specific advantages, and the ownership–location–internalization eclectic paradigm. We review the body of research on foreignness and track the evolution of its four streams, liability of foreignness, asset of foreignness, drivers of foreignness, and firm responses to foreignness. We call for a clearer conceptualization and a sounder theoretical grounding of the foreignness construct, more integration of the liability of foreignness and the asset of foreignness research streams, greater attention to the multiple strategies firms use to manage foreignness, and the extension of the field to less-explored contexts such as emerging economies, digitalization, and de-globalization.
Highlights
Foreignness is inherent to multinational enterprises (MNEs): its conceptualization, manifestations, and consequences are central to international business (IB) research
We aim to provide a critical review of the various streams of foreignness research in IB, highlight the theoretical tensions and debates within each stream, and suggest potential avenues for cross-fertilization and integration
We have tracked the evolution of the four major streams of foreignness research – liability of foreignness (LOF), asset of foreignness (AOF), the drivers of foreignness, and firm responses to it – and considered their respective interactions and integration
Summary
Foreignness is inherent to multinational enterprises (MNEs): its conceptualization, manifestations, and consequences are central to international business (IB) research. Edman (2016a) attempts to consolidate the different theoretical foundations of LOF and of AOF by arguing that a firm’s foreignness is not just a country-level imprint and a firm-level identity that can be purposefully managed This identitybased framework represents the first attempt at explaining how LOF and AOF can be actively managed by MNEs. Impact of AOF As we wrote earlier, the impact of AOF is reflected in higher foreign firm legitimacy (Kostova & Zaheer, 1999; Insch & Miller, 2005), better brand image (Brannen, 2004), and greater survival rates (Kronborg & Thomsen, 2009). How do MNEs choose between market-based (e.g., forming alliances with local firms or joining local trade associations) and non-market strategies (e.g., engaging in CSR or corporate political strategies)? Are local learning and firm identity management complements or substitutes? As foreignness is a social and institutional phenomenon with significant economic implications, research that explores the joint effects of market and non-market strategies is especially germane and salient at a time of global volatility, rising nationalism, ethnic conflicts, trade protections, and pandemics
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